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Asian Chip Stocks Mostly Rise Despite New U.S. Semiconductor Export Curbs on China

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INTRODUCTION

On Tuesday, major Asian chip stocks, excluding those in China, saw positive gains despite the announcement of a new round of U.S. semiconductor export restrictions targeting China’s chip production capabilities. The Biden administration’s latest move aims to hinder China’s access to advanced semiconductor technology that could potentially aid its military advancements.

KEY POINTS

Performance of Asian Chip Stocks

  • Taiwan Semiconductor Manufacturing Company (TSMC):
    The world’s largest contract chip supplier saw a 2.4% increase in its stock price.
  • Japanese Chip Stocks:
    Several Japanese chip-related companies experienced gains:

    • Tokyo Electron rose 4.7%.
    • Lasertec climbed 6.7%.
    • Advantest gained 3.9%.
    • Renesas Electronics advanced 2.2%.
  • Softbank:
    Softbank, which holds a stake in the British chip designer Arm, saw its shares rise by 3.6%.

Impact on South Korean Chip Makers

  • Samsung and SK Hynix:
    Despite the new U.S. restrictions, shares of Samsung Electronics rose by 0.9%, and SK Hynix saw an increase of 1.8%.

    • Derrick Irwin, portfolio manager at Allspring Global Investments, stated that the impact on high-bandwidth memory chips from South Korean players would be limited. He believes that these companies could shift demand to markets like the U.S., minimizing the effect of the curbs.

Details of U.S. Export Restrictions

  • Targeted Companies:
    The U.S. Department of Commerce imposed restrictions on 140 new companies, including major Chinese firms like Naura Technology Group, Piotech, and ACM Research. These companies are now on the U.S. export control list.

    • In China, Naura Technology’s shares fell 3%, while ACM Research dropped by 1%. Piotech, however, saw a 1% rise.
    • Semiconductor Manufacturing International Corporation (SMIC), China’s largest chipmaker, saw a 1.5% drop in Hong Kong.
  • Scope of Restrictions:
    The new U.S. controls also include restrictions on 24 types of manufacturing equipment and three types of software tools essential for semiconductor production.

    • Reason for Restrictions: U.S. Secretary of Commerce Gina Raimondo emphasized that these measures were designed to impair China’s ability to produce advanced technologies that pose a national security risk to the U.S.

Concerns and Compliance Issues

  • Huawei and TSMC:
    A report last month raised questions about the effectiveness of U.S. chip restrictions after a TSMC-made chip was found in a Huawei product.

    • In response, the U.S. has implemented new “red flag guidance” to address compliance concerns and introduced several regulatory changes to enhance the effectiveness of its semiconductor controls.

CONCLUSION

Despite the recent U.S. export curbs targeting China’s semiconductor sector, major Asian chip stocks largely rose, with companies like TSMC and key Japanese players leading the charge. While the new restrictions may impact Chinese companies and South Korean chipmakers to some extent, analysts suggest that the overall effect on the broader market could be limited, as companies pivot to other markets.

 

TSMC to Halt Advanced AI Chip Production for China

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Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, has reportedly informed Chinese chip design companies that it will suspend the production of their most advanced artificial intelligence (AI) chips starting Monday, November 11. According to a report by the Financial Times, TSMC has made this decision in response to increased regulatory pressure from the U.S. The move is said to affect the manufacturing of AI chips based on process nodes of 7 nanometers or smaller, which are critical for cutting-edge AI applications.

The suspension of these high-performance chips, which are used for AI training and other sophisticated tasks, comes amid escalating tensions between the U.S. and China over technology and security concerns. TSMC’s decision will impact Chinese companies that rely on the company’s advanced manufacturing capabilities to produce some of the world’s most powerful AI processors. These chips are central to the development of AI models that can power everything from autonomous vehicles to high-performance computing tasks.

The U.S. government has long expressed concerns over China’s growing capabilities in artificial intelligence, particularly its potential use in military applications or to advance bioweapon research and cyber warfare. In light of these concerns, Washington has imposed a series of measures aimed at restricting the flow of advanced semiconductor technologies to China. This includes regulations designed to limit the shipment of advanced graphics processing units (GPUs) and other AI chips that are crucial for training large-scale AI systems. The measures are seen as part of a broader strategy to curb China’s technological rise and maintain U.S. dominance in key fields.

TSMC’s suspension of advanced AI chip production for Chinese clients marks a significant development in the ongoing global tech rivalry. It underscores the growing influence of U.S. policies on global semiconductor supply chains, particularly as companies like TSMC, which is headquartered in Taiwan, find themselves navigating complex geopolitical pressures. The decision also raises questions about the future of China’s AI ambitions, as it now faces increased difficulty in securing the critical hardware needed to advance its AI capabilities.

US Finalizes $6.6 Billion Chips Subsidy for TSMC Ahead of Trump’s Presidency

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The U.S. Commerce Department announced on Friday the completion of a $6.6 billion subsidy deal with Taiwan Semiconductor Manufacturing Co. (TSMC) to support semiconductor production in Phoenix, Arizona. The agreement, part of the $52.7 billion Chips and Science Act, marks the program’s first major award since its inception in 2022.

Deal Highlights

  • Expanded Investment: TSMC agreed to increase its total Arizona investment from $40 billion to $65 billion, adding a third fab in Arizona by 2030.
  • Advanced Manufacturing: TSMC will produce 2-nanometer technology chips at its second Arizona fab, set to begin production in 2028. It will also deploy its A16 chip manufacturing technology, one of the world’s most advanced.
  • Financial Structure: In addition to the $6.6 billion subsidy, the agreement includes up to $5 billion in low-cost government loans. Payments will be tied to project milestones, with at least $1 billion expected to be released by year-end 2024.

Commerce Secretary Gina Raimondo highlighted the strategic importance of the deal, emphasizing its role in ensuring the U.S. produces cutting-edge chips domestically. “We had to convince TSMC that they would want to expand,” she said, stressing the economic and national security implications of the agreement.

National Security and Policy Concerns

The announcement comes amid heightened scrutiny of semiconductor technology exports to China. On Saturday, reports emerged that the Commerce Department had instructed TSMC to halt shipments of advanced chips to Chinese customers. Raimondo did not confirm the directive but stated, “Investing in TSMC to expand here is offense—defense is ensuring our most sophisticated technology does not reach adversaries like China.”

The subsidy agreement also requires TSMC to forgo stock buybacks for five years and share excess profits with the U.S. government under an “upside sharing agreement.”

Context and Challenges

The Chips and Science Act was designed to bolster domestic semiconductor production, a critical industry where the U.S. lags behind global leaders. Currently, no leading-edge chips are produced domestically. TSMC CEO C.C. Wei called the deal a key accelerator for advancing U.S. chip manufacturing capabilities.

However, President-elect Donald Trump has criticized the Chips Act, raising questions about the program’s future under his administration. Meanwhile, Commerce has allocated additional funds for other semiconductor projects, including $6.4 billion for Samsung in Texas, $8.5 billion for Intel, and $6.1 billion for Micron Technology. Raimondo aims to finalize these agreements before President Joe Biden leaves office in January.

Geopolitical Implications

The U.S. push for semiconductor independence underscores broader strategic concerns about global supply chains and national security. Raimondo reiterated the importance of balancing offensive and defensive strategies, ensuring subsidies support U.S. technological leadership while preventing advanced technologies from reaching competitors like China.

Outlook

With TSMC’s increased commitment and advanced chip production capabilities, the U.S. aims to regain its footing in the global semiconductor market. However, challenges remain, including Trump’s potential policy changes and the delicate geopolitical balance with China.